Saudi contractor MMG incurs $11m H1 2016 net loss
Mohammad Al-Mojil Group partly attributed its accumulated losses to foreign contractors "enjoying favouritism" and non-payment from large companies
Saudi contractor Mohammad Al-Mojil Group (MMG) announced a net loss of $11.2m (SAR42m) as part of its 2016 half year financial results.
The figure is a drop from the $21.9m (SAR82m) losses incurred last year.
In a statement on Saudi bourse Tadawul, MMG said this quarter's loss has been incurred "mainly due to non recovery of major receivable during the current quarter".
MMG said the annual decrease in losses is due to its completion of loss making projects in 2015, which allowed the company to control its costs this year.
According to a press statement distributed on 1 August, MMG's former board "laments the perceived lack of assistance offered by Saudi Arabian authorities to help resolve an issue seriously impacting MMG – and the construction sector as a whole – regarding significant numbers of loss-making sub-contracts".
The half-year losses show an increase in the accumulated losses as of 30 June, 2016 (with the interim losses) to $959.9m (SAR3.6bn), or 289% of paid-up capital.
The statement continued: "The Al-Mojil family referred much of the responsibility for these losses to the mega projects’ foreign contractors (EPC’s) enjoying favouritism and protection on the expense of their local subcontractors when there are delays and disruptions on sites (a common feature in Saudi Arabia, especially recently).
"MMG failed to recover hundreds of millions of assets it had to provide for as losses due to non-payment from companies like Italian Saipem/Snamprogetti, Korean Daelim, Korean SKEC, French Fives Solios, UK/UAE Petrofac, Spanish Técnicas Reunidas, Italian Danieli, and Saudi BinLaden [Group]," the statement continued.
"Those contractors won projects from a Saudi government related body (Aramco, Maaden, and others), and were paid billions of riyals.
"They subcontracted and failed to pay MMG its fair and legitimate compensation," the statement added.
In the statement, MMG said these numbers "render the long-term recovery of the company impossible without the collection of the off-balance sheet assets that it is owed by customers, and/or the injection of fresh equity funding from external sources".
In June 2016, the Committee for the Resolution of Securities Disputes (CRSD) – part of Saudi Arabia’s Capital Market Authority (CMA) – imposed prison sentences on three MMG executives.
Founder Mohammad Al-Mojil and his son Adel were each sentenced to five years’ imprisonment for claims relating to a 2008 IPO prospectus.
At the time, the Al-Mojil family described the CRSD judement as being based on "fundamentally flawed evidence" and a "biased investigation", the press statement added.
MMG's board resigned en masse in June, citing the "unlimited liability" on directors posed by the CMA’s decisions.
The CMA has appointed an administrative committee to oversee MMG’s affairs until the shareholders elect a new board, but it is yet unclear when MMG will hold its next shareholder assembly.
Mohammad Al-Mojil still owns 50% of MMG, and the remaining 50% is owned mainly by Saudi retail public shareholders, according to the statement.
"This is an inevitable outcome from the lack of meaningful support to MMG by Saudi government agencies and organisations, the latest of which is the CMA’s recent heavy-handed and unrealistic verdict, which was not based on facts, but feelings and opinions fuelled by unjust and disproportionate rhetoric from certain shareholders and critics," the statement added.
"Instead of tackling the real issues behind the complex and myriad problems affecting the Saudi construction sector in the last few years, the CMA concentrated its efforts on punishing MMG’s founders, after it restricted the free market forces to set the share price and exchange ownership.
"The founder of MMG at this stage invites those critics of the company and its outgoing board to step forward to fill vacant positions on the board and showcase their managerial skills and vision."